The Commodity Futures Trading Commission, citing an inability to fully understand swaps-market data, has begun an overhaul of information collected by the Depository Trust & Clearing Corp., CME Group Inc. and others.
The top U.S. derivatives regulator released a request for comment yesterday on about 70 questions on ways to change how and which information must be reported to the swap-data repositories created under Dodd-Frank Act rules. The CFTC could later propose changes to policies intended to help regulators supervise the $693 trillion market.
“The data we’ve received frankly hasn’t been clean enough for us to make sense of it as easily and as quickly as we need to be able to do,” Mark Wetjen, the CFTC’s acting chairman, said at a U.S. Chamber of Commerce conference in Washington. “We’re prepared to make corrections if we need to.”
The CFTC and Securities and Exchange Commission were required by Dodd-Frank, the 2010 regulatory overhaul, to create rules for the databases to ensure authorities can spot risks in the financial system. Regulators lacked complete understanding of how interconnected banks had become through the swaps market before the the collapse of Lehman Brothers Holdings Inc. during the 2008 credit crisis.
The data regulations have been a challenge at CFTC, which is defending against a lawsuit brought by DTCC over how trade information can be reported. New York-based DTCC said CME’s approval to have information about swaps reported to its own database is anticompetitive and reduces transparency, and accused the CFTC of unfairly favoring Chicago-based CME.
Scott O’Malia, a Republican CFTC commissioner, raised questions last year about the adequacy of the data rules. The data was failing to give regulators a full picture of the swaps market and wouldn’t help them detect a loss similar to JPMorgan Chase & Co.’s London Whale trades, he said in March 2013.
“We have a long way to go,” O’Malia said in a March 18 speech. “The commission needs to be precise about what it wants from the market.”
DTCC is reviewing the agency’s request for comment and “looks forward to continue working with the CFTC to support regulatory and industry efforts to enhance transparency,” Marisol Collazo, chief executive officer of DTCC’s data repository, said in a statement. Laurie Bischel, a CME spokeswoman, declined to comment on the CFTC’s request.
Data repositories operated by IntercontinentalExchange Group Inc. and Bloomberg LP, the parent company of Bloomberg News, have also registered with the CFTC.
The case is Depository Trust & Clearing Corp. v. U.S. Commodity Futures Trading Commission, 13-cv-624, U.S. District Court, District of Columbia (Washington).